Judge Nealon of Lackawanna County Addresses COVID-19 Business Interruption Coverage Issues

In the case of The Scranton Club v. Tuscarora Wayne Mutual Group, Inc., No. 20-CV-2469 (C.P. Lacka. Co. Jan. 25, 2021 Nealon, J.), the court addressed insurance coverage issues related to government closure orders brought on by the COVID-19 pandemic.

In this case, the operator of a private social club, which sold food and alcoholic beverages and also catered events, instituted an action against its commercial property insurer seeking to recover under its business income, extra expense, and civil authority coverages for revenues lost and additional costs incurred due to the government closure orders issued in response to the COVID-19 pandemic.

The issue came before the court by way of the carrier’s Preliminary Objections asserting a demurrer to the Plaintiff’s claims on the grounds that the Plaintiff’s claims were barred by the virus exclusion in the policy, that the operator’s allegations do not satisfy the “direct physical loss or damage” to property requirement for business income and extra expense coverage, and, under an argument that the civil authority coverage was inapplicable since the operator did not allege that it was prohibited access to its property as a result of the dangerous physical conditions of a neighboring property.

The court ruled that, under the specific terms of the virus exclusion in this policy, it could not be stated as a matter of law that the exclusion applied under the circumstances presented. As such, the insurance company’s demurrer based upon the virus exclusion was overruled.

However, the court sustained the demurrers asserted by the insurance company based upon a finding that, with respect to the requirement that the Plaintiff assert a direct physical loss of or damage to covered property, the Plaintiff had failed to allege that COVID-19 was ever physical present on the premises or that the loss of the property’s utility had some relation to the physical condition of the premises.

The court also found that the Plaintiff failed to implicate the civil authority coverage as the Plaintiff had not alleged that any damage to a neighboring property or an accompanying civil authority directive have resulted in damages to the Plaintiff’s own property.

The court additionally ruled that, since it was determined that the business income, extra expense, and civil authority coverage did not apply in this case, the Plaintiff was unable to establish any valid bad faith claims based upon the carrier’s denial of coverage.

In the end, this COVID-19 insurance coverage litigation was dismissed.


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